Updated: Tue Jul. 28 2009 3:44:15 PM

The Canadian Press

TORONTO — A $2.8-billion drop in revenues is being blamed for Ontario's growing deficit -- a figure that ballooned to $18.5 billion in June amid a massive government bailout to the struggling auto industry.

The province's first-quarter update shows the deficit increase -- $4.4 billion more than set out on the March budget -- was due more to a drop in revenues than to expenditures associated with help for GM and Chrysler.

According to the province's figures, the auto bailout only increased total expense by $1.5 billion.

The budget had set aside $2.5 billion of its contingency funds to help the auto sector, as Ontario committed $4.8 billion in aid to General Motors and Chrysler.

The first-quarter revenue drop includes a decline in retail sales tax revenue of $310 million as well as lower employer health tax and Ontario health premium revenue because of lower employment.

Business tax revenue was also down on a sharp drop in profit.

The figures also show Ontario had to pay an additional $100 million in higher interest on debts than initially anticipated.